UK and International Tax news

EC Publishes Details Of State Aid Investigations Into Ireland And Luxembourg Tax Rulings

Friday 3rd October 2014

Following the opening in June 2014 of three in-depth investigations by the EC to examine whether EU state aid rules had been broken by tax authorities in Ireland, the Netherlands and Luxembourg , the EC has recently published two letters with its latest findings in relation to corporate income tax paid by Apple in Ireland and Fiat in Luxembourg.

The EC had been investigating under EU state aid rules certain tax practices in several Member States following media reports alleging that some companies have received significant tax reductions by way of tax rulings issued by national tax authorities.

The EC did not call into question the general tax regimes of the three Member States concerned but has looked more closely at certain tax rulings [advance pricing agreements] which were used to confirm transfer pricing arrangements between various parts of the same group of companies, in particular prices set for goods sold or services provided by one subsidiary of a corporate group to another subsidiary of the same group.

The EC has now examined rulings issued by the Irish tax authorities on the calculation of the taxable profit allocated to the Irish branches of Apple Sales International and of Apple Operations Europe and in its letter to the Minister for Foreign Affairs in Dublin confirmed its preliminary view that tax rulings in 1990 and 2007 in favour of the Apple group constitute state aid according to Article 107(1) TFEU and has doubts about the compatibility of such aid with the internal market.

It has requested Ireland to submit its comments and provide further information in order to assess the aid given.  It has also reconfirmed that any unlawful aid may be recovered from the recipient under Article 14 of Council Regulation EC NO 659/1999.

The EC has similarly examined the ruling issued by the Luxembourg tax authorities on the calculation of the taxable basis in Luxembourg for the financing activities of Fiat Finance and Trade, and has written to the Luxembourg tax authorities to confirm its initial view that unlawful state aid may have been given to Fiat.

It is expected that the EC may publish its final decisions within the next 18 months.

The EC report on rulings issued by the Dutch tax authorities on the calculation of the taxable basis in the Netherlands for manufacturing activities of Starbucks Manufacturing EMEA BV has not yet been published.

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